THE Revenue Commissioners have been harshly criticised over advice they gave to a State body in the course of a lengthy losing legal battle that the state mounted against a Tralee company that once managed the controversial National Aquatic Centre in Dublin.

Last year, in what was an historic legal finding against the State, Campus Stadium Ireland Development (CSID) lost a Supreme Court claim for €10.5m worth of VAT from the former operators of the National Aquatic Centre, Dublin Waterworld Limited.

The Chairman of Dublin Waterworld Limited is Fenit businessman John Moriarty. Traleebased businessmen Kieran Ruttledge and Liam Bohan, who run the Tralee Aquadome are also part of the Dublin Waterworld Group.

It emerged last week that CSID had pursued the case despite the fact that they had been advised against doing so by the Comptroller and Auditor General.

At the Dáil Public Accounts Committee (PAC) last week it was also claimed that the legal proceedings taken by the State against Dublin Waterworld was based on "flawed" advice by the Revenue Commissioners.

In an historic decision in 2010 the Supreme Court ruled that under the Finance Act Dublin Waterworld was not liable to pay a €10 million VAT bill associated with the National Aqautic Centre and that the Tralee based company should never have asked to pay the bill.

At the PAC hearing into the circumstances surrounding the State's failed legal battle with Dublin Waterworld last Friday, the Secretary general of the Department of Transport, Tourism and Sport Tom O'mahony said the Comptroller and Auditor General had, in 2004, advised dropping the VAT claim.

However the PAC heard that the Department of Finance and the Revenue Commissioners gave contradictory instructions advising that the claim be pursued.

Mr O'mahony said that Irish tax law was "immensely complicated" and that the Department of Sport had to rely on the guidelines given by the Revenue Commissioners in relation to how to apply the Finance Act.

"The VAT strategy was in line with the Revenue guidelines which were in place until the Supreme Court ruled in 2010 that they were not the correct interpretation of the legislation."

The Department of Sport could not have been expected to have "20:20 vision" and to know that the Supreme Court would overturn the guidelines, Mr O'mahony said.

"Nobody in the Department incorrectly interpreted the guidelines. The guidelines were an incorrect interpretation of the legislation."

The Dáil Public Accounts Committee is also expected to hear further details of claims that the CSID was told to withhold a "devastatingly low valuation of the facility because it "did not suit" its purposes in a €10.2m legal battle.

Under VAT legislation, and in order to win its case and pass the VAT bill onto Dublin Waterworld, CSID would have needed the lease on the National Aquatic Centre to be worth more than the €63 million it cost to build the centre.

Documents released last week show that in 2002 the State Valuation Office told CSID the lease on the centre was only worth €35m.

Despite this advice, CSID persisted with a legal argument that was based on the contention the contract was worth €75m.

Seven years after this advice was given to CSID the state quango lost the €10.2m Supreme Court case that had hinged on this valuation. The Supreme Court judgment said the €35m valuation it withheld had a "devastating" impact on its bid to pass the VAT onto Dublin Waterworld.

Details of an email that were revealed last week show that CSID'S financial advisers Pricewaterhouse Cooper had suggested that the €35m valuation should not be shared with Dublin Waterworld as it undermined the State body's case.

- SIMON BROUDER